Initial Evaluation of Suppliers

XYZ Company has set up an initial evaluation system and collected data of its three potential suppliers. The company
has taken eight categories of evaluation factors with more than one sub categories of each of the category. It also
assigned weight for each of the category and sub-category. Data were collected for each sub-category on a 5-point
scale and shown in the following table.

Score (5 Pt scale)
Weigh Weight
Category Company Compan Company
t Subcategory
  A yB C
1. Quality Systems   20        
Process control systems     5 4 5 3
Total quality commitment     8 3 4 3
Parts-per-million defect performance     7 4 4 3
             
2. Management Capability   10        
Management/labor relations     5 3 3 4
Management capability     5 4 5 3
             
3. Financial Condition   10        
Debt structure     5 4 4 5
Turnover ratios     5 3 4 4
             
4. Cost Structure   15        
Costs relative to industry     6 4 4 3
Understanding of costs     4 3 5 4
Cost control/reduction efforts     5 5 4 4
             
5. Delivery Performance   15        
Performance to promise     5 3 5 4
Lead-time requirements     5 4 4 3
Responsiveness     5 3 4 2
             
6. Technical/Process Capability   15        
Product innovation     5 4 4 3
Process innovation     4 5 4 2
Research and development     6 3 5 3
             
7. Information Systems Capability   5        
EDI capability     3 4 4 5
CAD/CAM     2 0 1 0
             
8. General   10        
Support of minority suppliers     2 3 3 4
Environmental compliance     3 3 5 2
Supplier’s supply base management     5 4 4 3

Evaluate and find which company will be selected initially for supplying materials.
Solution:
Company A: (5x5 + 8 x4 + 7 x 4 + 5 x 3 +5 x 5 + 5 x 4 + 5 x 3 + 6 x 4 + 4 x 3 + 5 x 5 +5 x 3 + 5 x 4 + 5 x 3 +
5 x 4 + 4 x 5 + 6 x 3 + 3 x 4 + 2 x 0 + 2 x 3 + 3 x 3 + 5 x 4)/5 = 68.6

Company B: (5x4 + 8 x3 + 7 x 4 + 5 x 3 +5 x 4 + 5 x 4 + 5 x 4 + 6 x 4 + 4 x 5 + 5 x 4 +5 x 5 + 5 x 4 + 5 x 4 +
5 x 4 + 4 x 4 + 6 x 5 + 3 x 4 + 2 x 1 + 2 x 3 + 3 x 5 + 5 x 4)/5 = 79.4

Company C: (5x3 + 8 x3 + 7 x 3 + 5 x 4 +5 x 3 + 5 x 5 + 5 x 4 + 6 x 3 + 4 x 4 + 5 x 4 +5 x 4 + 5 x 3 + 5 x 2 +
5 x 3 + 4 x 2 + 6 x 3 + 3 x 5 + 2 x 0 + 2 x 4 + 3 x 2 + 5 x 3)/5 = 64.8

Since Company B has the highest score so XYZ company can go with it.